Investors may want to jump on weakness in Shopify (NYSE:SHOP) stock. After plummeting from a high of $1,703.50, the e-commerce stock is now oversold at $605.63, and could pay off with several key catalysts.
For one, the company plans to split SHOP stock 10-for-1 in an effort to make the stock more attractive to investors. Two, Baird analyst Colin Sebastian just noted, “We believe improving merchant trends could improve visibility for growth and mitigate some of the competitive concerns.” Three, SHOP stock trades at just 16x sales, which according to Motley Fool contributor Jamie Louko, is the lowest since 2019.
SHOP Stock Has Plenty of Room for Growth Left
We also have to consider that Shopify has plenty of room to run in a potential $5.55 trillion market. According to Shopify, “Two years ago, only 17.8% of sales were made from online purchases. That number is expected to reach 21% in 2022, a 17.9% increase in ecommerce market share over two years. Growth is expected to continue, reaching 24.5% by 2025.”
In addition, while the company has had its hiccups along the way, it’s still growing well.
For full-year 2021, for example, revenue soared 57% year-over-year to $4.6 billion. Subscription revenues were up 48% to $1.3 billion. Merchant revenues were up 62% to $3.26 billion. Even better, gross merchandise volume (GMV) jumped 47% YOY to $175.4 billion. Also, while the company does expect full-year 2022 revenue growth to be lower than the 57% in 2021, I believe much of that negativity has been fully priced into the stock.
With that, I’d rush to buy Shopify on recent, temporary weakness. With patience, I believe Shopify could race back to $1,703.50 in the long term. We’ll get more information on the company’s growth when it posts financial results for the first quarter before markets open on May 5.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
